Posted on Friday, 27th August 2010 by Lucy Hales
Q: I wonder how to refinance my home loan. I owe about $150,000 on the mortgage and $30,000 on the line of credit. My house is worth conservatively around $250,000. I am only looking at the first mortgage. I am about 6 years into the 30 year fixed rate mortgage at 5.375% and thinking about 20 year term. I earn $90,000 a year and credit score is above 730. My biggest concern is that I cosigned for nephew’s student loans. He owes close to $130,000 and has paid since April, $615 per month. Is this going to negatively affect my credit score and interest rate?
A: The fact that you are a cosigner has very little to do with the interest rates in ongoing mortgage and housing mess. And as long as the nephew is paying on time, will not do anything to your credit scores. However, it has everything to do with debt to income ratio which is the decisive factor if you are to qualify for the new mortgage. So stop worrying about would be mortgage interest rate and start worrying about your recurring monthly payments like credit cards, auto loans, child support, alimony, etc. How to go about? Just put them all on the piece of paper including that $615 student loan payment, because as a cosigner you are responsible. Then sum all the payments up and divide the resulting dollar amount by your gross monthly income. Gross means before taxes. The resulting ratio between your monthly payment amount and gross income with today lending guidelines should be under 50%, to the best knowledge.
The only way for the payment on student loans that you cosigned for not to be counted against your monthly expenses is to show 12 to 15 monthly bank statements that prove that the nephew is paying on time without you helping him. While you are still responsible for this loan as a cosigner, such a payment record would show that he can handle it himself. Here is some relevant reading,
Erasing or disputing cosigned student loan won’t work
Cosigning a student loan – a sure way to ask for troubles!
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Tags: Loan, Student Loan
Posted in Free Credit Report News | 1 Comment »
September 15th, 2011 at 1:33 pm
I agree and I would like to make a comment – College education generally entails a whole lot of expenses for which students take on several student loan interest rates. Most often, these loans, their interest rates and repayment schedules turn out to be a big bother. With various student loan interest rates to keep track of together with a never-ending stream of student loan interest rates, students get entangled in these rather than focusing on studies.